Australian Lender Sentiment Survey H1 2024

Key points:

CBRE Research’s H1 2024 Lender Sentiment Survey finds:

• Appetite for new loans over the next three months has increased for majority of lenders, 58% want to grow  commercial real estate exposures with and no surveyed lenders intending to decrease their book.
• Lender investment preference continues to be dominated by the Industrial & Logistics sector, followed by Residential. Nearly 1/4^th of Lenders rank student accommodation as a top two preference. Lenders continue to display caution towards the Office sector.
• For new residential-to-sell construction lending, the largest cohort of lenders require 80%-100% of debt funding covered by pre-sales.
• The total cost of debt remains at elevated levels and there is no clear consensus view has yet to be formed amongst institutions and surveyed lenders as to whether rates have peaked, and their expected trajectory over the next 12 months.
• Credit margin expectations normalised following H2 2024’s survey, with over 2/3^rds of respondents in H1 2024 expecting flattish movement in credit spreads over the next 3-months.
• A moderate decrease in hedging requirements, presumably as interest rate volatility has subsided from levels seen over 2023.
• Preferred LVR requirements have shifted moderately, however majority of respondents continue to have LVR requirements between 40-60%, consistent with prior surveys.
• ICR requirements remained stable over the last six months with more than half (53%) of lenders requiring a 1.5x ratio.